Centre notifies ₹945-crore seed fund scheme for start-ups

The Centre has notified the ‘Start-up India Seed Fund Scheme (SISFS)’ with a corpus of ₹945 crore to provide financial assistance to start-ups for proof of concept, prototype development, product trials, market entry and commercialisation.

Financial assistance to eligible start-ups across sectors under the SISFS will be disbursed through selected incubators across India in 2021-25, as per a gazette notification from the Ministry of Commerce & Industry. The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry will implement the scheme.

The DPIIT had been pressing the Finance Ministry for approval for implementation of both the Credit Guarantee Scheme for Start-ups (CGSS) and Start-up India Seed Fund Scheme (SISFS) in the pre-Budget discussions to sort out funding problems being faced by start-ups.

The proposed CGSS will have a higher outlay of ₹2,000 crore to provide much-needed debt funding to start-ups.

“The SISFS has now been implemented following a recent announcement made by Prime Minister Narendra Modi on the scheme. Hopefully, approval for the CGSS, too, will subsequently be granted and it can be notified as well,” an official tracking the matter told BusinessLine.

The SISFS can be availed by a start-up, recognised by DPIIT, incorporated not more than two years ago at the time of application. It must have a suitable commercially viable business idea and should use technology in its core product or service.

“Preference would be given to start-ups creating innovative solutions in sectors such as social impact, waste management, water management, financial inclusion, education, agriculture, food processing, biotechnology, healthcare, energy, mobility, defence, space, railways, oil and gas, textiles, etc.,” the notification stated.

The eligible start-ups should not have received more than ₹ 10 lakh of monetary support under any other Central or State Government scheme. However, this does not include prize money from competitions and grand challenges, subsidised working space, founder monthly allowance, access to labs, or access to prototyping facility

Another condition for eligibility is that shareholding by Indian promoters in the startup should be at least 51 per cent at the time of application to the incubator for the scheme, as per the Companies Act, 2013 and SEBI (ICDR) Regulations, 2018. A startup will not receive seed support more than once each as per provisions of guidelines.

Incubators eligible under the scheme must be legal entities, be operational for at least two years on the date of application to the scheme, have facilities to seat at least 25 individuals and have at least five startups undergoing incubation physically. The incubators must also have a full-time Chief Executive Officer, supported by a capable team.

India has about 50,000 start-ups in India in 2018; around 8,900–9,300 of these are technology led start-ups 1,300 new tech start-ups were born in 2019 alone, implying there are 2-3 tech start-ups born every day, as per government figures.

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